INVO Bioscience, Inc. (INVO)·Q2 2023 Earnings Summary

Executive Summary

• Q2 revenue was $0.316M, up 116% year over year; consolidated clinic revenue rose 126% to $0.254M, while total revenue from all clinics (consolidated + equity method JVs) reached $0.712M, up 145% .
• Sequentially, reported revenue declined versus Q1 ($0.348M), reflecting quarterly variability amid clinic ramp and mix shift; adjusted EBITDA improved to $(1.574)M from $(1.748)M in Q1 and $(2.233)M in Q4 2022 .
• Strategic catalysts: closed the acquisition of Wisconsin Fertility Institute (2022 revenue ~$5.4M, net income ~$1.7M), implemented cost reductions, and received FDA 510(k) clearance for INVOcell’s 5‑day incubation (improved outcomes, similar to IVF) .
• Management guided for INVO Center clinic operations to be cash flow positive in Q3 2023 and overall operating cash flow positive in 2024, citing WFI scale, expense reductions, and eliminated 510(k) submission costs as drivers .

What Went Well and What Went Wrong

• What Went Well

  • Year-over-year growth re-accelerated: revenue +116%, consolidated clinic revenue +126%, and total clinic revenue (incl. equity method JVs) +145%, underscoring demand and improved execution across centers .
  • Strategic progress: closed WFI (profitable IVF center) to accelerate services scale and introduce IVC alongside IVF; purchase price $10M over three years with initial $2.15M cash paid at close .
  • Regulatory milestone: FDA 510(k) clearance expanded INVOcell labeling to 5-day incubation with supporting data showing improved outcomes vs. day 3; management expects higher adoption and confidence .
  • Quote: “The closing of the WFI acquisition last week, coupled with the rapid 145% revenue growth in our existing INVO Center’s during this past quarter, should position our clinic operations to be cash flow positive in the third quarter of this year.” — Steve Shum, CEO .

• What Went Wrong

  • Profitability still constrained: Q2 net loss was $(2.241)M; diluted EPS was $(3.06), reflecting continued operating loss and quarterly variability in margins; cash at quarter-end was ~$0.112M before a subsequent $4.5M gross raise .
  • Margin pressure: cost of revenue rose to $0.236M in Q2, compressing gross margin vs. Q1 (79% disclosed), as clinic ramp and mix likely weighed on quarterly margin; SG&A remained elevated at ~$2.0M albeit down year over year .
  • Estimates context: S&P Global consensus EPS and revenue estimates for Q2 2023 were unavailable for INVO in our dataset, limiting beat/miss analysis versus Street expectations (see Estimates Context).

Financial Results

Note: Q2 2023 gross margin approximated using reported revenue ($315,902) and cost of revenue ($235,714); calculation: (Revenue − Cost of revenue)/Revenue .

Segment/Source Breakdown

Operating Expense and R&D (for context)

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “We believe we have successfully transformed INVO into a rapidly growing, innovative healthcare services company which allows us to help accelerate IVC volume and obtain a greater share of the total fertility cycle revenue.” — Steve Shum, CEO .
• “The closing of the WFI acquisition last week…should position our clinic operations to be cash flow positive in the third quarter of this year…[and] drive the business towards overall operating cash flow positive in 2024.” — Steve Shum, CEO .
• Q1 context: “These three centers…achieving record levels of revenue and patient cycles…We are extremely pleased to see the existing clinics nearing break-even…” — Steve Shum, CEO .

Q&A Highlights

• Based on external transcript sources, investor Q&A focused on integration of WFI, regulatory progress for INVOcell’s 5‑day incubation, clinic ramp/throughput, and path to profitability; see full Q2 2023 transcript at Seeking Alpha and MarketScreener .
• Management reiterated near-term clinic cash flow and 2024 operating cash flow goals, clarified WFI integration steps (adding IVC alongside IVF), and pointed to expense reductions and elimination of 510(k) related costs aiding trajectory .

Estimates Context

• S&P Global consensus estimates for Q2 2023 revenue and EPS were unavailable for INVO in our dataset due to missing Capital IQ mapping, so beat/miss vs. Street cannot be determined at this time (Values from S&P Global were unavailable).
• Given positive y/y growth and adjusted EBITDA improvement, near-term estimate revisions may focus on services revenue scale from WFI and the impact of 5‑day INVOcell adoption on product and clinic mix .

Key Takeaways for Investors

• Services scale-up is the narrative: closing WFI and progressing Tampa materially increase clinic footprint and revenue capture per cycle; watch near-term clinic cash flow positivity in Q3 2023 as a validation milestone .
• Regulatory tailwind: 5‑day INVOcell clearance should bolster adoption and outcomes, potentially improving product sales and clinic economics over time .
• Margin trajectory: Q2 margin compression vs. Q1 highlights execution sensitivity to clinic mix and ramp; management’s cost actions and scale from WFI are key to restoring margin momentum .
• Liquidity: Q2 quarter-end cash was ~$0.112M, but subsequent gross capital raise of ~$4.5M provides runway; monitor working capital and integration costs as operations scale .
• Non-GAAP lens: adjusted EBITDA improved sequentially and y/y; continued progress here is a leading indicator of breakeven in centers and eventual corporate cash flow positivity .
• Near-term trading implications: headlines on clinic cash flow positivity and early signs of INVOcell 5‑day adoption could be catalysts; conversely, any delays in Tampa opening or WFI integration could weigh.
• Medium-term thesis: a diversified model (IVF + IVC) across owned centers plus product distribution, supported by improved clinical outcomes, can expand addressable market and stabilize revenue/margins as the network matures .